Wednesday saw stocks finally bounce in what was probably the most expected jump for the month as just about everyone knew stocks were incredibly oversold.
The SPX added 71 points to end the day at 3719, up 1.9%. The NASDAQ rose 222 points to end the day at 11051, up 2%. The question now is whether the bounce can turn into a rally and move higher on Thursday.
Let’s review the close on Wednesday to see what we should expect for Thursday.
Stock Market Outlook Chart Comments At The Close on Wed Sep 28 2022
At the close of trading the S&P closing candlestick is signaling that Wednesday’s bounce was a bearish bounce but also signals there should be enough strength to push higher on Thursday.
A new down signal occurred on Wednesday with the 100 day moving average falling below the 50 day moving average.
The 21 day moving average continued its descent.
The Upper Bollinger Band is falling and may end up below the 200 day moving average which is bearish. The Lower Bollinger Band is still falling indicating stocks have not yet bottomed.
All the moving averages are still falling which is bearish.
There are now 5 down signals in place since April and no up signals.
The chart is 90% bearish for Thursday with the closing candlestick suggesting the index should move higher on Thursday..
Stock Market Outlook: Technical Indicators Review:
Momentum: Momentum is rising and negative. It is signaling a bounce is underway.
- Settings: For momentum I use a 10 period when studying market direction.
MACD Histogram: MACD (Moving Averages Convergence / Divergence) issued a down signal on Monday Aug 22. On Wednesday the down signal lost strength. The histogram also lost strength. Both signals are still very bearish.
- Settings: For MACD Histogram, I am using the Fast Points set at 13, Slow Points at 26 and Smoothing at 9.
Ultimate Oscillator: The Ultimate Oscillator is rising but still negative. It has moved outside oversold readings.
- Settings: The Ultimate Oscillator settings are: Period 1 is 5, Period 2 is 10, Period 3 is 15, Factor 1 is 4, Factor 2 is 2 and Factor 3 is 1. These are not the default settings but are the settings I use with the S&P 500 chart set for 1 to 3 months.
Slow Stochastic: The Slow Stochastic has an up signal for a third day Signals are still at readings we saw in mid-June before the market bounced. The signal is oversold.
Settings: For the Slow Stochastic I use the K period of 14 and D period of 3. The Slow Stochastic tries to predict the market direction further out than just one day.
Relative Strength Index: The RSI signal is rising and moving out of being oversold.
- Settings: The relative strength index is set for a period of 5 which gives it 5 days of market movement to monitor. It is often the first indicator to show an overbought or oversold signal.
Rate of Change: The rate of change signal is rising.
- Settings: Rate Of Change is set for a 21 period. This indicator looks back 21 days and compares price action from the past to the present. With the Rate Of Change, prices are rising when signals are positive. Conversely, prices are falling when signals are negative. As an advance rises the Rate Of Change signal should also rise higher, otherwise the rally is suspect. A decline should see the Rate Of Change fall into negative signals. The more negative the signals the stronger the decline.
Support and Resistance Levels To Be Aware Of:
4000 is light resistance
3975 is light resistance and is a decline of 17.5%
3950 is light resistance
3925 is light resistance
3900 is light resistance
3875 is light resistance
3850 is light resistance
3825 is light resistance
3810 is light resistance
3800 is light resistance
3775 is light resistance
3750 is light resistance
3730 is light support
3700 is good support
3675 is light support
3650 is light support
3625 is light support
3600 is good support and is a decline of 25%
Stock Market Outlook for Tomorrow – Thu Sep 29 2022
For Thursday the closing candlestick advised that the bounce on Wednesday should have enough staying power to move higher on Thursday. Many of the technical indicators are still signaling oversold which should help stocks climb.
Overall though while the bounce was finally great to see, the outlook is still bearish.
Potential Market Moving Events
The biggest market moving event for the week is on Friday when we get more inflation numbers.
10:00 Pending Home Sales Index came in at -2.0%, below expectations.
8:30 Weekly Initial Unemployment Insurance Claims
8:30 Real GDP for second quarter.
Two Fed Presidents speak on Thursday
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